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What Are Your Chances Of Getting a Sales and Use Tax Audit?

Three Main Criteria
Every company “doing business” in a sales tax jurisdiction, whether registered or not, could potentially get audited.  There are three main criteria that greatly increase your company’s odds:

1) A high ratio of exempt sales.  If you are consistently reporting a high ratio of exempt sales, it means you’d better have a good exemption certificate management process in place.  States like to catch companies who don’t.  Not only should you be collecting these certificates, but also they need to be validated for accuracy, updated when expired, and stored in an accessible manner.
2) Your industry.  If you are in a cash-based industry, such as a restaurant, then it is easier to neglect to report and pay the proper sales tax.  Likewise, if you are in a manufacturing industry, it is easy to neglect to report and pay consumer use tax.  These are typically areas of “low-hanging fruit” ripe for the picking by state auditors.
3) Your audit history.  If you have been assessed penalty and interest in past audits, it may mean that you had a faulty process that hasn’t been adequately corrected in subsequent audit periods.  States will review your past audit workpapers to pinpoint your past issues and branch out from there.

How to Protect Your Business
As the saying goes, “an ounce of prevention is worth a pound of cure”.  It is much more beneficial to know your issues before an audit rather than learn about them during an audit.  As your business grows, automation should become your goal.  Managing exemption certificates using electronic software to allow for instantaneous access and reports of expiring certificates is invaluable in a business with a high ratio of exempt sales.  Likewise, programs to implement the self-assessment of consumer use tax or to track cash-based transactions and to interface with tax rate engines are very beneficial for compliance.

A knowledgeable tax staff or a good working relationship with a tax consulting firm can provide much needed support for the ever-changing tax laws.

How Can We Help? 
Allyn’s tax team is staffed with seasoned tax professionals experienced in all aspects of multi-state and local tax compliance and consulting for large US and global corporations.  We use that experience to your advantage.  Contact us and we can provide a customized cost-effective solution to meet your company’s needs.  For further information on Allyn Tax services, please contact: tax@allynintl.com.

About Allyn International

Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance.  Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North America, Europe and Asia and Allyn regional headquarters are strategically located in Fort Myers FL USA, Shanghai P.R. CHINA and Prague, CZECH REPUBLIC. For more information, log on to www.allynintl.com.

 

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